Prioritisation: How we decide which medicines need funding first

Working within a budget

The team at Pharmac works hard to fund as many medicines as possible to get the best health outcomes for New Zealanders. We compare all the applications we get and decide which ones will get the best health outcomes for New Zealanders within our budget.

Prioritisation is our process for comparing the costs and benefits of funding one medicine against another. 

We make our decisions by drawing on the best available clinical evidence as well as advice from clinicians and the lived experienced of people with various health conditions. 

Prioritising is not straightforward

It’s hard to compare a medicine that treats heart disease to one that treats advanced bowel cancer – they’re apples and oranges. How do we level the playing field, so we’re comparing apples with apples?

One part of the process is a cost-utility analysis. This technique is used around the world to make fair and consistent comparisons between medicines and medical technologies.

Cost-utility analysis helps us figure out:

• how much better a new medicine or related product is compared with those we already fund
• whether any additional benefit is worth the cost
• whether funding a new medicine or related product makes the best contribution to New Zealand’s health 

Download Cost Utility Explained [PDF, 3.4 MB]

More than a cost-benefit exercise

We need to understand the full picture of funding applications and what effect decisions will have. Our independent clinical experts help us with the science and our health economists run the numbers. But we need to think broader than just the individual patient and the money.

We use the Factors for Consideration to understand the impact funding (or not funding) a medicine will have more broadly. We especially consider the impact for populations that have worse health outcomes, such as Māori.

At every stage of considering an application, we refer back to the Factors. They ensure we think about:

• people taking medicine
• whānau of people needing treatment
• the health system
• New Zealand society as a whole. 

The Factors for Consideration

Real people make these decisions

Prioritisation is not just done with calculators and graphs. Four times a year, experts and advisors from Pharmac gather for prioritisation meetings. We compare each medicine against all the others to answer this deceptively simple question:

What should we fund first when we can afford it?

We then rank each and every application from our highest priority to our lowest priority. 

Ranking lists

Once prioritised, we add the medicine to one of 3 lists:

• options for investment
• only if cost neutral or cost saving
• applications for decline

We keep the priority of each medicine on the options for investment list a secret. This gives our skilled team of contract managers leverage to negotiate better prices. If pharmaceutical companies knew how much we wanted to fund a product, they could use that information to demand higher prices.

We don’t necessarily fund our applications in order. Sometimes we may be able to take a couple of applications off the list and fund them through a bundle deal. We always make sure that our decisions create better health outcomes for New Zealanders.

How long does it take?

During the 2023/24 financial year, applications received in the last 5 years took an average of 21.5 months to go from being accepted to being ranked on our priority list. Our goal is to see this decrease over time.  

Once ranked, the time for making a funding decision is affected by multiple factors, including:

• where the application ranks compared to all the others we would like to fund
• the amount of funding available

From application to funded medicine: Pharmac's process

Learn more 

We publish all the frameworks we use to assess medicine funding applications.

Our policies and procedures